Seth Klarman on Deep Value Investing

Guru Focus summarizes Seth Klarman's value approach here. Note the author of the article states upfront:

This digest of Seth A. Klarman’s investment strategies and practices is mainly based on a guest lecture by superinvestor Seth Klarman at Columbia Business School and his book, Margin of Safety. Many sections here are not Klarman’s exact words, but our digest of the distilled essence of his investment methods.

That said, it's good stuff.

You'll find a link to Klarman's Margin of Safety (with its outrageous price) among the books in the menu at the lower right of this page.

And in the "for what it's worth department," I noticed Baupost was a shareholder of Walter Industries when researching the company.

Comments

[Moon]

I happened to have read MoS recently myself. The article quotes something that I wondered about during my reading: is there still a 2-3 month lag before spin-off company data reaches the computer databases? The book was written in 1991, so I wondered how dated that point was.

[Moon]

I thought I would contribute something from my own notes on MoS, this from the section in Ch. 13 on selling:

Selling: The Hardest Decision of All

an investor buys with a range of value in mind at a price that affords a considerable margin of safety; as the market price appreciates, potential return diminishes and downside risk increases; therefore, it is understandable that an investor cannot be as confident in the sell decision as he or she was in the purchase decision

there is only one valid rule for selling: all investments are for sale at the right price; decisions to sell must be based on underlying business value; exactly when to sell depends on the alternative opportunities that are available; it is foolish to hold out for an extra fraction of a point of gain in a stock selling just below underlying value when the market offers many bargains; it is likewise foolish to sell a stock at a gain (and pay taxes on the gain) if it were still significantly undervalued and no better bargains were available

stop-loss selling is crazy: instead of taking advantage of market dips to increase one’s holdings, stop-loss selling admits that the market knows the merits of a particular investment better than the investor

the likely presence of a buyer must be a factor in the decision to sell: “Feed the birds when they are hungry.”

[John]

Moon: As to your first comment, I frankly don't know. Thanks for your second comment as well.